Tsipras presses for May debt deal, threatens referendum

Greek Prime Minister Alexis Tsipras attends a news conference with Russian President Vladimir Putin at the Kremlin in Moscow April 8, 2015.Alexander Zemlianichenko/Pool

ATHENS (Reuters) - Greek Prime Minister Alexis Tsipras said on Tuesday he was confident of an outline deal with international creditors within two weeks, after shaking up his negotiating team and sidelining his finance minister who has infuriated euro zone partners.

Tsipras threatened to call a referendum if lenders insist on demands deemed unacceptable by his leftist government, elected to scrap austerity. But the head of euro zone finance ministers said Greece needed loans urgently and did not have time for such a vote, which would be a costly and destabilizing distraction.

Athens is weeks away from running out of cash, and talks with EU and IMF lenders on more aid have been deadlocked over their demands for Greece to implement reforms, including pension cuts and labor market liberalization.

In his first major television interview since being elected in January, Tsipras said he expected a deal with creditors by May 9, three days before a debt payment to the IMF of about 750 million euros ($815.5 million) falls due. He ruled out a default but stressed the priority was to pay wages and pensions.

Greek financial markets and the euro rallied on hopes that the relegation of Finance Minister Yanis Varoufakis, a Marxist academic prone to lecturing his euro zone peers, would improve prospects for an early deal to avoid a default that might lead to a Greek exit from the currency area.

Yet around half of investors expect Greece to leave the euro zone within the next 12 months, a survey published by German research group Sentix showed on Tuesday.

The European Commission said talks on a cash-for-reform deal were making progress but gave no details.

Pressed on options if no deal were found, Tsipras ruled out snap elections but said the government did not have the right to accept demands "outside our mandate", and any deal that required such terms would have to be put to Greeks in a referendum.

"But I am certain we will not reach that point. Despite the difficulties, the possibilities to win in the negotiations are large. We should not give in to panic moves. Whoever gets scared in this game loses."

Eurogroup chairman Jeroen Dijsselbloem said the shakeup in the Greek negotiating team would not by itself break the impasse and Athens would need new loans quickly to stay afloat.

"Without further loans, Greece won't make it, that's the reality," he told RTL Nieuws television in an interview. Asked about a possible referendum, he said: "It would cost money, it would create great political uncertainty, and I don't think we have the time. And I don't think the Greeks have time for it."

Tsipras said Greece was in the final stretch of negotiations despite differences on key issues like labor reform, pension cuts and a proposed value-added tax hike on tourist islands.

He said asset sales would be part of the concessions offered, including two major items - the sale of Piraeus port and the leasing of 14 regional airports.

He also said Greece was hoping for a 3 billion to 5 billion euro pre-payment of future profits if it struck a deal with Russia on Turkish Stream, a gas pipeline project.

"FINANCIAL ASPHYXIATION"

On Monday, Tsipras appointed Deputy Foreign Minister Euclid Tsakalotos - one of his close allies and a soft-spoken economist liked by officials representing creditors - to head a new group handling negotiations with Greece's lenders.

He also put economist George Chouliarakis, a close aide to Deputy Prime Minister Yannis Dragasakis, in charge of talks with the so-called Brussels group of the European Commission, the European Central Bank and the International Monetary Fund.

In an effort to show that Athens is serious about giving lenders access to data, a new team was also set up to support EU and IMF officials gathering information in the Greek capital.

The moves took the talks out of the hands of Varoufakis, but Tsipras defended him as a victim of character assassination.

"There is a negative climate but I believe that this part of the negotiating game," Tsipras said. "Part of the negotiating game is to deconstruct the person who sits opposite you at the negotiation table."

A senior European Central Bank policymaker, Bank of France governor Christian Noyer, said sidelining Varoufakis from the talks could be productive, but Athens still faced hard choices.

"He's creating a number of tensions so that can certainly help the negotiations - but it doesn't change the substance at all. The Greek government ... must finally decide on serious reforms to put the economy back on track," Noyer said.

In Brussels, a European Commission spokeswoman said the talks had gained pace since a confrontational meeting between Varoufakis and his euro zone peers in Riga last Friday.

Tsipras accused the previous conservative-led Greek government and unnamed forces in Europe of having laid a "trap" for his government when it took power.

"They derive pleasure from the prospect of a failure in the talks," Tsipras said. "We received a country that was in a situation of financial asphyxiation."

But he praised German Chancellor Angela Merkel - a frequent target of his criticism before he was elected - saying she was diligent and organized.

"She has the German culture of wanting - and I think this is good in our relationship - the other person to tell the truth, to not lie," he said. "And that's what I try to do; I don't lie."

In a symbolic move, parliament was due to vote later on Tuesday to reopen state broadcaster ERT, shut down nearly two years ago by the previous government which axed its more than 2,000 workers to satisfy the EU and IMF lenders.

The staff will be rehired - including a symphony orchestra - but Tsipras' Syriza party has promised that ERT will be merged with a successor station and will not add to the state budget.